UC retirement funds face a shortfall of more than $20 billion, report says
The University of California retirement system faces a shortfall of more than $20 billion, according to a new report, and a task force of administrators and employees is recommending changes to help fix the problem.
The panel, which released its report publicly Monday, proposed such changes as increasing contributions made by the university and employees, raising the minimum retirement age for new hires and reducing some benefits.
Much of the problem with the retirement fund stems from a decision 20 years ago when UC and its employees stopped paying into the retirement system because it was believed to be overfunded, officials said. The university and employees resumed payments this year, but concerns about the possibility of unfunded pensions and post-retirement healthcare continue, according to the report.
Over the next few months, UC President Mark G. Yudof and the university’s regents are expected to select and approve some proposals in the report. Some are controversial, and faculty members fear that they could hurt the ability of campuses to compete for new academic talent.
The recommendations include raising the amount, over the next two years, that employees and UC must contribute to pensions, from the current 2% and 4% of paychecks, respectively, to 5% and 10%. In other suggestions, new employees would not be allowed to retire and receive a pension until they reach the age of 55, up from the current 50, and they also could receive smaller pensions based on their years of service than current employees.
Yudof has warned of terrible consequences if the problem is not tackled quickly. “If we do nothing, in four years, the University will be spending more on retirement programs each year than we do on classroom instruction,” he wrote in a recent letter to UC employees.
Rollbacks in pension benefits also would require agreement from labor unions, as has been the case with similar benefit reductions that Gov. Arnold Schwarzenegger has won from other state employees recently.